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This story was originally published on the author’s substack, Field Notes with Alexander C Kaufman, to which you can subscribe here.
Costa Rica is positioning itself to take on Taiwan—and not just in the exports of pineapples.
In 2023, the Central American nation forged a new partnership with the United States to start manufacturing more semiconductors as Washington looked for new and less geopolitically sensitive sources of microchips. Last March, the Costa Rican Ministry of Foreign Trade issued an 80-page National Semiconductor Roadmap outlining plans for expanding the country’s so-called “Silicon Jungle.”
Any concerns that President Donald Trump might retreat from the Biden administration’s initiative were put to rest last week when Secretary of State Marco Rubio specifically singled out semiconductors during a summit with Costa Rican Rodrigo Chaves Robles.
“Our partnership with Costa Rica is paying dividends,” the State Department said in a statement posted to Facebook alongside a photograph of Rubio and Chaves Robles shaking hands. “U.S.-trained technicians in semiconductor assembly, testing and packaging are helping to secure our supply chains. That helps avoid the potential for future supply chain shocks.”
Costa Rica is famously among the most politically and economically stable countries in Central America, a legacy that traces back to the sparsely populated nation’s failure to impose the brutal colonial-era encomienda labor system that enslaved indigenous Americans throughout much of the rest of Spain’s former empire.
“Even if we restarted every nuclear plant, most of our power production in Taiwan is going to be coal and gas .”
Yet the country was mostly known for its agriculture. In 1996, USAID shuttered its office in Costa Rica, forcing the nation to look for other economic opportunities. Costa Rica’s foreign investment office ended up aggressively courting the California-based chipmaker Intel. After 19 meetings and the promise of operating in a tax-free zone, Intel agreed to build its first assembly and testing facility in Costa Rica, shocking Latin American rivals Brazil, Chile, and Mexico.
It was the start of what Armando Heilbron, a former economic diplomat for Costa Rica in the US, described in 2012 as the shift from “banana chips to microchips.”
While production waned in 2014 as Intel shifted more manufacturing to Asia, the company announced a $1.2 billion investment into its assembly line in Costa Rica in 2023.
Why the reversal? Taiwan’s increasing vulnerability to China’s efforts to bring the self-governing island under Beijing’s control for the first time since 1895 is one thing. Another is what Taiwan is doing to itself by dint of its own energy policy.
Like Japan and South Korea, nuclear power plants built from the late 1970s to the mid 1980s transformed Taiwan into a high-tech manufacturing hub despite a lack of local fossil fuels to exploit. Taiwan’s emergence as the world’s leading producer of semiconductors made the island so economically important to the rest of the world, the chip-making industry formed a “silicon shield” that defended the last stronghold of the losing side of the Chinese Civil War from invasion by the People’s Liberation Army.
Taiwan’s three nuclear power stations—the fourth one, started in the 2000s, remains unfinished—added an extra layer of security. Since reactors can go years without refueling, nuclear power lowered the risk of Beijing blockading fossil fuel imports to put pressure on the government in Taipei.
Taiwan’s ruling Democratic Progressive Party, which has opposed nuclear power since its founding in the mid 1980s, stepped up its effort to phase out all atomic energy on the island over the last few years. In May, the license for the last operating reactor at the Maanshan Nuclear Power Plant on Taiwan’s southern tip is set to expire.
Liquefied natural gas has largely replaced the power the nuclear plants once produced. As a result, electricity prices are soaring.
In November, Taiwan Semiconductor Manufacturing Company—the world’s most valuable chipmaker—said it now expected to pay more for power at home than any other country in which it operates. “Basically, the price has doubled in the past few years. So next year, we think that [the] electricity price for us in Taiwan will be the highest in all the regions that we operate,” Wendell Huang, TSMC’s chief financial officer, told investors in October.
And that’s with preferential treatment from Taiwan’s government-owned utility, Taipower. Other chipmakers and Taiwanese industrial firms face even worse price spikes.
Semiconductor manufacturers don’t just want cheap power—they want clean electricity. TSMC is accelerating its purchases of renewable power as the company joins rivals in seeking to capitalize on the premium tech giants such as Apple pay for so-called green chips. In its most recently quarterly earnings report, United Microelectronics Corporation, the No. 3 chipmaker in Taiwan, told investors it was also looking to acquire more renewable power.
As Costa Rica’s own national roadmap notes, TSMC wants zero-carbon power for 25 percent of its operations by the end of this decade.
Costa Rica generates nearly all its electricity from renewables. To boot, it’s the reliable 24/7 type that factories that run without breaks need—not intermittent wind and solar. Roughly 72 percent of Costa Rica’s electricity comes from hydroelectric dams. Another 15 percent is generated from geothermal heat.
“Even if we restarted every nuclear plant, most of our power production in Taiwan is going to be coal and gas going forward,” Angelica Oung, a pro-nuclear clean-energy advocate in Taipei, told me over WhatsApp. “Costa Rica is one of the rare places in the world that’s blessed with a lot of renewables like hydro. So they’re going to be much greener than Taiwan no matter what happens.”
That may leave the semiconductor industry saying the same thing I heard from virtually every person I encountered while in Costa Rica’s west coast Guanacaste Province last month for my cousin’s wedding: pura vida.
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Publish date : 2025-02-28 22:00:00
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